Should you get a mortgage in retirement?
Photo by Paul Kapischka | Unsplash.com
Why buy a new home after retiring? You may want to downsize, move to a more agreeable climate or be closer to the grandkids.
Yet just like any other homebuyer, retirees face formidable issues like high mortgage rates, elevated home prices, and associated costs on insurance, maintenance and possibly homeowner association fees.
The average U.S. mortgage rate was 6.65% in March, while median home prices are expected to rise to $410,700 in 2025, according to the National Association of Realtors (NAR). A separate NAR report showed that over one-third of U.S. homebuyers last year were 59 to 99 years old, and the majority of them used some form of financing.
The high cost of buying a home is particularly problematic for U.S. retirees living on a fixed income. That means older buyers need to be fully aware of what they can afford and the associated expenses of owning a home, such as maintenance, repairs and insurance.
“You’d hate to purchase a home and not be able to afford basic necessities or the things that make retirement enjoyable, like travel, spending time with family and personal hobbies,” said Melissa Shaw, Wealth Management Advisor at TIAA in Palo Alto, California.
High interest rates projected for the rest of the year can also stall a retiree’s moving plans.
“High rates alone pose a problem for retirees hoping to buy,” said Adam Hamilton, CEO at REI Hub in Richmond, Virginia.
“If they still really want to buy, being flexible with location might help,” Hamilton said, “and making sure to shop around for the best lender is crucial.”
Is it hard to get a mortgage in retirement?
The good news is that with due diligence and a carefully crafted financial plan, retirees can get the mortgage they need for a new home in 2025.
Like with any home purchase, more income and less debt are ideal. Yet that goal can be a unique issue for older homebuyers.
“For retirees, one of the biggest issues they face is income verification, especially if they rely on a fixed income like Social Security or a pension,” said Christy Bunce, president at New American Funding in Irvine, California.
“However, if they have significant assets, that could help them qualify for a home loan,” she said. “Their debt-to-income ratio is also important, as it shows how much they’d have left over to pay their mortgage.”
In addition to any income from work, income sources lenders focus on include: Social Security benefits, spousal benefits, disability payments, pension or annuity payments, interest and dividend payments on investments, a 401(k) or IRA.
What to do before applying for a mortgage
Given that their best earning years are likely behind them, retirees should ensure their finances are in order before applying for a mortgage. Telling the right financial story goes a long way in getting a mortgage for older homebuyers.
“Just like anyone else, credit history, FICO Scores, income sources and the ability to repay the loan matter most,” said Matthew Locke, National Mortgage Sales Manager at UMB Bank.
“We recommend paying down revolving debts and fully understanding what payment they can comfortably afford,” Locke said. “Speak to a trusted mortgage professional to fully understand the cost to close a home deal and the monthly payment obligation going forward.”
TIAA’s Shaw advises crossing these items off your mortgage to-do list before applying:
- Ensure you have enough income to pay for the mortgage, associated home expenses, and any emergency or incidental issues not covered by insurance.
- Research the homeowner’s insurance options in your potential location and evaluate the likelihood of those costs increasing.
- Gather two years of income, bank and investment/retirement account statements (your lender may require documents for a more extended period). “Make sure to review your most recent credit report, too,” Shaw advised.
- Use online mortgage calculator tools so you know exactly what you can afford.
- Discuss the options for generating additional income from your investment or retirement accounts with your financial advisor. “Many of my clients set up monthly systematic withdrawals from their retirement accounts to meet the income requirements for a mortgage,” Shaw said.
Avoid these mistakes when applying for a mortgage
The biggest mistake Shaw sees from retired clients is taking on a larger mortgage than they can afford or not factoring in additional housing-related expenses.
“For example, I had a client who retired and moved from a coastal area to a more inland area in California,” she said. “Although it’s only a few hours away, the difference in the weather is significant. The client didn’t anticipate that he and his family would need to use their air conditioning or pool as often, leading to a sizeable increase in energy and cleaning costs.”
Those often-unexpected additional expenses lead to increased withdrawals from the client’s retirement account.
“My client didn’t have any other income source or the ability to return to the workforce,” Shaw noted. “This meant tightening the budget on some of the other non-essential expenses. Retirees should always ensure a buffer in their budget for unexpected increases in the cost of basics, like utilities, insurance and home maintenance.”
Bottom line
Retirees will increase their odds of getting a good mortgage by presenting lenders with a clear picture showing they’re solid loan candidates.
“Your best move is to show lenders you have stable finances by using assets to bolster income,” said Matt Schwartz, co-founder at VA Loan Network in Dallas, Texas. “Also, focus on your credit scores or don’t make any significant financial withdrawals before applying.”
Take time to find the right house in the neighborhood that meets your financial situation.
“Don’t be impatient about moving too quickly,” Locke advised. “Also, avoid buying too much house and using too many assets to purchase the house.”
© 2025 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.
